Livestock Analysis | August 4, 2022
Price action: August lean hog futures fell 35 cents to $120.65 while October futures rose $1.75 to $97.60, the contract’s highest closing price since April 22, after posting a wide trading range of nearly $4.
Fundamental analysis: Solid weekly export sales numbers and better cash market fundamentals late this week supported hog futures. The CME lean hog index was down 63 cents to $120.94 (as of Aug. 2) but remains near a 14-month high. August futures moved to a slight discount to the cash index today. Pork cutout values early today rose $3.43 to $128.92, led by gains in bellies. Movement was decent at 148 loads. The five-day national direct rolling average cash hog price today was quoted at $126.04.
USDA reported net weekly U.S. pork export sales totaling 31,000 MT, up 43% from the previous week and up 35% from the prior four-week average, with the lead buyer China. Hog slaughter levels are likely to rise seasonally in the coming weeks, with lower fall and winter demand for most pork cuts likely prompting a decline in cash hog and pork product prices into the end of the year. Those factors may limit upside hog futures in the coming weeks.
Technical analysis: Bulls have a near-term technical advantage as October futures prices posted an outside day higher close and remain in a four-week uptrend on the daily chart. The next upside price objective for bulls is closing October above solid resistance at the March high of $100.825. The next downside objective for bears is closing prices below solid support at $93.00. First resistance is seen at the July high of $97.875, then $99.00. First support is seen at $96.00, then at $95.00.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
Price action: August live cattle fell 20 cents to $137.70, while October futures fell 30 cents to $143.65. September feeders fell 32.5 cents to $182.575.
Fundamental analysis: Live cattle futures fell in a modest corrective setback from Wednesday’s rally to three-month highs, with a resurgent cash market limiting selling interest. Feeder cattle futures were pressured by strength in corn, but the market remains poised to continue higher amid an outlook for tightening animal supplies. Choice beef cutout values rose 27 cents early today to $268.21. Live steers averaged $139.82 through Wednesday morning, about even with last week’s average and defying expectations earlier this week that cash price would fall a fifth straight week.
Also today, USDA reported net weekly U.S. beef sales of 12,000 MT for 2022, down 52% from the previous week and down 30% from the average for the previous four weeks.
Technical analysis: Bulls still hold an advantage in nearby August and October live cattle futures. The August contract traded a 57 1/2-cent range and was unable to breach resistance around $138.50 and $139.10. Support is seen around $137.20 and 136.35. October futures traded a 75-cent range and was unable to breach resistance at $144.575 or support at $142.875.
September feeder futures retain a bullish bias and may be poised for more upside. However, support at $181.475 was tested today, with second support at $180.05 ending the day unscathed. Resistance is seen around $183.775 and $184.65.
What to do: Be prepared to extend feed coverage when market bottoms are in place.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You are hand-to-mouth on corn-for-feed and soybean meal needs.
